Tech startups no longer scared of recession

By Sudarshan Kumar   |   Thursday, 28 May 2009, 10:43 Hrs   |    13 Comments
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Tech startups no longer scared of recession
Bangalore: Recession? IT budgets slashing? Indian start-up software companies do not see recession as a nuisance to them. Most of the companies have taken the challenge and used recession as a tool to strengthen the businesses.

Rajendhaar, Director, PerfeITo Software Solutions says, "Though it is recession, clients rely on our service and its quality. We are making sure that, every penny given to us is returned to them in the form of business benefits. This strategy is making us better in survival during the recession."

Gartner, a research firm says, "India Inc's IT budgets will grow at just 5.52 percent in 2009, compared with 13.2 percent in 2008." Somewhat reassuringly, this rate of growth is attractive when compared with the flat spending seen in North America and Europe, and a slight decrease in Asia-Pacific, it says.

Springboard Research, another research firm, had earlier mentioned in its research that with the economic crisis expected to further worsen, we will see IT spending affected in India, although not to the same degree as in North America, Europe and other Asia Pacific markets (Japan, Australia and Korea).

Though the scenario is not as bad as elsewhere, there is no denying the fact that clients are bargaining hard or avoid paying out the whole bill at once. An anonymous source says, "At the time of recession, project billing has gone down by more than 30 percent." In some cases, companies have changed their pricing model to completely focus on cash flows rather than only Top line Revenue flows. Rahul Chawla, CEO, In4velocity says, "Now we have restructured several existing past deals with huge amount of installments to give the clients a commitment on cash flow and expense line upfront rather than the unpredictability of larger Capex numbers."

To run the businesses by investing less amount of money, some of the companies have preferred Indian engineers to their foreign counterparts to run businesses at low investment. Sachin Lakharia, CEO, Shopnics says, "I came back to Bangalore to find some great talent at a reasonable price and to cut down my personal and company expenses so that we could carry on for a longer time on our own money."

By and large, the recession period has also forced some of the entrepreneurs to cut down their own expenditure and operation costs of the company. Lakharia says, "My lifestyle has changed a lot. We are also doing most of the development ourselves and keeping our development hires to a minimum."

Despite the ups and downs, companies expect the market to be stable soon. Now, companies are changing their target customers to increase the cash flow. Chawla says, "For a company, each deal used to be important few months ago but has now become critical. As large spending has dried up, we have changed target markets, the business model and the team structure to move towards a smaller ticket item per transaction model."

Click here to know more about Indian startups and their trends.

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